Govt takes new avatar as bull on stock markets

Govt takes new avatar as bull on stock markets
ENS ECONOMIC BUREAU

MUMBAI, FEB 4: Who’s the new bull on the stock markets? It’s none other than the government itself. The government’s nod for disinvestment of its stake in two public sector undertakings (PSUs) has done wonders to the PSU sector as a whole. The Government of India maintained its position as the country’s largest industrial group. The combined market-cap of 50 PSUs surged by 3.87% (over Rs 4,000 crore) during the week to Rs 118,409.78 crore following an across-the-board rally in PSU stocks.

The Cabinet Committee on Disinvestment, in its meeting held last week, has decided that the government will sell 26% stake in VSNL and 57% stake in CMC to strategic partners. The market remained firm last week despite a devastating earthquake in Gujarat and the Supreme Court’s rejection of BSE brokers’ plea to withdraw the turnover tax imposed on them by SEBI. The market-cap of top 1,540 companies on BSE dropped slightly to Rs 696,744.50 crore from Rs 697,509.38 crore a week earlier, according to a study by Capital Market. PSU scrips shot into the limelight on Friday after the Cabinet Committee on Disinvestment cleared disinvestment of government stake in at least two listed PSUs, viz. VSNL and CMC. It was decided in the CCD meeting that the government will sell 26% in VSNL and 57% in CMC to strategic partners. All PSU stocks posted gains on this development, lifting the market sentiment.

VSNL, the country’s monopoly overseas telecommunications carrier, and largest Internet Service Provider (ISP) gained 11.52% during the week to Rs 382.15. PSU infotech major CMC, too, gained 22.99% during the week to Rs 355.10 on hopes of a decision on disinvesment. “Divestment seems to be gaining ground now,” said BSE dealer Pawan Dharnidharka.

Other PSU stocks like MTNL (up 3.18% to Rs 203.95), HPCL (down 0.52% to Rs 190.40), BPCL (up 6.84% to Rs 170.90), and GAIL (up 10.84% to Rs 58.75) also attracted buying support. BHEL (up 8.41% to Rs 174.50) managed to remain firm during the week in spite of poor quarterly results. For the quarter ended 31 December 2000, the PSU engineering major posted a net profit of Rs 196.96 crore against a net profit of Rs 101.7 crore in the corresponding quarter of 1999.“It is the beginning... the government needs to keep the momentum going,” said Sanjay Sachdev, managing director of IDBI Principal Asset Management. The benchmark Bombay Stock Exchange Sensex, where state-run companies have nearly 12 percent weightage, ended the week 0.51% higher at 4,352.26 on Friday. The index has risen 9.57 percent since the start of the year.

Analysts expect the rally to spill over into this week as investors try to identify candidates who could become the beneficiaries of the government’s next move. Unlike in the past, when question marks hung over the government’s sincerity in giving the public sector greater freedom, the markets seem sure that the government will step up its privatisation move.

“After Gujarat, they really don’t have a choice. They have to start selling their stakes to get additional funds,” said a chief dealer in a local brokerage. “Sentiment is definitely high, but the acid test will come when the government tries to sell stakes in some old economy companies with large workforces,” he said. A strong trend in foreign fund flows is also expected to spur stock prices next week. Offshore funds pumped $849.9 million into Indian equities in January 2001, 15 times more than a year earlier and more than half the entire amount for last year.

Meanwhile, the Subhash Chandra group lost its ranking by one place to No 9 following a fall of 8.85% in market-cap during the week to Rs 11,151.52 crore. The Kumarmangalam Birla group replaced Zee group at No. 8 on a 1.36% rise in market cap to Rs 11,93.61 crore, following the rise in market-cap of key group companies like Hindalco (up 3.39% to Rs 5,773.55 crore) and Grasim (up 10.27% to Rs 3,055.36 crore).

Cement major Gujarat Ambuja group moved up to No. 11 following a 7.31% rise in market-cap to Rs 6,771.49 crore. Cement scrips were in the limelight last week on hopes of improved demand for cement - for the reconstruction work in quake-affected regions of Gujarat. Gujarat Ambuja group displaced the Sterlite group at No. 12, which shed 10.13% in market-cap during the week to Rs 6,328.06 crore.Among the other major market-cap gainers during the week were: the House of Tatas (up 2% to Rs 15,246.94 crore), HDFC (up 3.24% to Rs 12,970.57 crore), Burmah Castrol (up 5.29% to Rs 3,411.53 crore), Om Prakash Jindal (up 15.43% to Rs 1,984.28 crore), Morepen (up 4.89% to Rs 1,258.28 crore), ABB (up 3.73% to Rs ,117.67 crore), Escorts (up 4.03% to Rs 925.40 crore) and Great Eastern (up 4.30% to Rs 885.78 crore). Among the other gainers of the week, Reliance Industries touched a new 52-week high of Rs 395.55. Reliance Petroleum became the No. 1 company, in terms of sales, in the Indian private sector, after the company posted its quarterly results.